‘What ifs’ plague today’s auto industry

There are concerns whether or not Fiat can reform Chrysler.

PHOTO: Roberto Schmidt, Getty Images

By David Booth, Canwest News Service

Originally published: July 23, 2009

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What if General Motors, new and improved as it may be, just can’t make the grade? It’s a tough old world out there and as much as new CEO Fritz Henderson is making all the right noises, there’s no guarantee that this, just like all the rest of the company’s recoveries and rejuvenations, is just one more episode of rose-tinted delusion. What if, like a bad relationship fraught with infidelity, it’s simply too late to end the suffering? The cuckholded consumer may just say, “Yes, yes, I hear that you’ve changed. Yes, isn’t it nice that you’ve finally done the right thing. But, actually, you know, I’ve moved on. I have a new car. I’m living happily in the suburbs with my new Nissan and a double-bay garage.”

It is not even remotely trite to think of GM as the car company that used to drive the North American economy. That it may not be the world’s largest automaker — or even the largest in the United States — anymore matters not a whit. If The General fails, the fallout will be disastrous, both financially and for the American psyche.

What if Fiat can’t reform Chrysler? The road to recovery for the much troubled and erratic automaker looks to be long and hard. Thanks to a stifling of funds by former owners Cerberus (and to a lesser extent, DaimlerBenz), there’s not a huge stockpile of all-new products waiting to take wing from Chrysler’s R & D department. Any influence that Fiat might have on the company’s model lineup is still a year and a half away. And, we have to be honest here, Fiat’s track record in North America is not one that fills analysts, pundits and even Chrysler employees with a resounding sigh of relief that reinforcements are on their way, if you just hold on a few hours longer, Colonel Custer. I think the Fiat deal was the best — nay, the only — chance to save Chrysler. That doesn’t mean it isn’t a huge gamble.

What if Ford can’t be competitive with a seemingly out-of-bankruptcy General Motors (not to mention Chrysler)? For all the doomsday scenarios we heard for the 12 months leading up to GM’s historic Chapter 11 filing, it now seems to have been a) unavoidable and b) the smartest move. Ford, meanwhile, to the plaudits of government, media and consumers alike, has moved forward without the government’s teat. And, in terms of sales and consumer confidence, it has benefitted enormously, stunning analysts with recent results. But what if even that relative success can’t overcome the advantageous deals GM and Chrysler have wrung from bondholders and the UAW? It would be both ironic and incredibly disturbing if the one company that didn’t ask for a bailout and declare bankruptcy suffers for its relative success.

What if Porsche can’t regain its footing? Two years ago, the little company that could was being touted as the success everyone in the industry should emulate. OK, the automaker produced only about 100,000 cars, but, Lordy, was it profitable! Then, like the guppy whose eyes get larger than its stomach, Porsche tried to swallow the whale. Nine billion Euros later, the maker of the iconic 911 is wobbling under the debt it assumed in trying to take over Volkswagen. There’s talk of Porsche being bailed out by a Middle Eastern investment fund and there is much speculation over who will eventually control Porsche and VW. Ferdinand Piech, he of the Machiavellian machinations involving Volkswagen and Porsche, must be having a heyday.

Despite their obvious import, these scenarios are but the proverbial tip of the iceberg threatening the automotive status quo. What if, by some miraculous triumph of cheap labour over engineering, Tata does get its dirt cheap Nano approved for sale in the United States? What happens when Nissan, General Motors, et al produce the electric cars the media/government/environmentalists have been clamouring for and nobody is willing to pay extra for their inconvenience?

Of course, the biggest question mark remains the economy. The Bank of Canada noted recently that two surveys prognosticated from on high the Great White North will soon roar out of this economic morass. Funny, it doesn’t feel like that down here at street level. Despite their claims to have factored even the worst possible scenarios, virtually every car company is expecting/hoping/promising the Lord anything He wants for an economic turnaround. So far, most automakers, save the Americans, have managed to forestall truly disruptive cutbacks. Indeed, now even Magna’s generous bid for Opel is facing resistance from cantankerous unions. Will they be as adamant if this financial malaise sets in for the long haul?

There’s only one absolute, unassailable certainty in all of this — there’s no shortage of automotive-related stories or fodder for a paid-by-the-word motor journalist.